ЕOC 11.04Consider two car factories, one run by Ford and the other run by Honda, that both create pollution. The government wants toreduce how much these two factories pollute by 40 tons, so only allow factories to pollute if they have a permit. Each factory isgiven 20 pollution permits. A business can use a permit to emit one ton of pollution or they can sell it to another business (andlose the ability to pollute). To lower pollution it costs Ford $200 per ton of pollutant removed and it costs Honda $100 per tonremoved. After Ford and Honda have met to trade their permits with each other, what we expect to happen?Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.Honda emits 20 tons of pollutants and Ford emits 20 tons of pollutants.aHonda no longer pollutes and Ford does not lower how much it produces.Honda increases its pollution and Ford lowers its pollution.Ford no longer pollutes and Honda does not lower how much it produces.

option b is the correct answer Hondo no longer polluts and Ford does not lower how much it…

Answered: EOC 11.04 Consider two car factories,…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 10PA

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Similar questions

In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
Is zero pollution an optimal goal? Way or why not?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?
Give an example of a positive externality and an example of a negative externality.
Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
Classify the following pollution-control policies as command-and-control or market incentive based. A state emissions tax on the quantity of carbon emitted by each firm. The federal government requires domestic auto companies to improve car emissions by 2020. The EPA sets national standards for water quality. A city sells permits to films that allow them to emit a specified quantity of pollution. The federal government pays fishermen to preserve salmon.
From an economic perspective, is it sound policy to pursue a goal of zero pollution? Why or why not?

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